What is a “Distributor” Under the California Medical and Adult Use Regulation and Safety Act?

The governor of California’s trailer bill known as Senate Bill 94 passed, which married the Medical Cannabis Regulation and Safety Act (MCRSA) and the Adult Use of Marijuana Act (AUMA). The regulations under the MCRSA have been scrapped and state regulators are furiously trying to draft emergency regulations for the cannabis industry. State licensing is fast approaching, with regulators informing the public that they will be open for business by January 1, 2018. Things are complicated.

However, one thing that the new Medical and Adult Use Regulation and Safety Act (MAUCRSA) (the baby of MCRSA and AUMA) made uncomplicated is the distribution rules. Right now, the law on the books says that cannabis products need not be sold directly to distributors, but instead, licensed cultivators, or manufacturers for that matter, can directly contract with retailers for the sale of cannabis. See California Business and Professions Code section 26110 (h). That’s the good news. However, you, as a cannabis cultivator, cannot completely escape the “middleman” distributor. Prior to the time cannabis gets to your retailer, the product has to be tested, assured for quality and transported. Business and Professions Code section 26070 (b); 26110 (d), (e). Which licensee is the only one authorized by statute to do those things? You guessed it, the distributor.

There is one exception to the need for a distributor under the new law, and that is a licensee who is a “microbusiness.” A microbusiness can cultivate on an area of less than 10,000 square feet and act as a licensed distributor, manufacturer, and retailer, as long as it can comply with the laws and regulations applicable to the activities the microbusiness chooses to engage in.